All Posts by Renae Pitargue

Avoid ATO’S increased tax penalties

As the ATO directs its attention towards taxpayers grappling with unresolved tax lodgements and debts, it's crucial to understand how to steer clear of facing heightened penalty rates in the upcoming fiscal year of 2023–24. 

In this article, we explore strategies to help you manage your financial compliance and minimise the impact of these changes on your obligations.

Increased Scrutiny on High-Value Outstanding Debts

The ATO (Australian Taxation Office) has received increased funding to intensify its scrutiny on taxpayers with high-value outstanding debts and aged debts. If you're among the following categories, it's time to take note:

• Public and multinational groups with an aggregate turnover surpassing $10 million.
• Privately owned groups or individuals controlling a net wealth exceeding $5 million.

The goal is to ensure that outstanding debts over $100,000 and aged debts older than two years are properly addressed. 

Rising Penalty Rates: What You Need to Know

As of 1 July 2023, the Commonwealth penalty unit rate has seen another increase, now resting at $313 per unit. This change follows a previous increase in January 2023 from $222 to $275.

What does this mean for you? 

If you fall behind on your tax lodgements, expect more substantial financial penalties.

These penalties may apply to late lodgements of various returns and reports, including but not limited to:

• activity statements
• income tax returns
• FBT returns
• PAYG withholding annual reports
• single touch payroll reports
• annual GST returns and information reports
• taxable payment annual reports.

For small businesses, these penalty rates translate to base penalties ranging from $313 (1 penalty unit) to $1,565 (5 penalty units) for every 28 days a lodgement is overdue.

Lodgement Penalty Amnesty for Small Businesses

There is some good news for small businesses facing overdue income tax returns, fringe benefits tax returns, or business activity statements. 

The ATO is extending a helping hand through a lodgement amnesty, valid until 31 December 2023.

Announced as part of the 2023–24 Budget, this amnesty covers tax obligations originally due between 1 December 2019 and 28 February 2022. 

Eligibility is granted to small businesses with an aggregated turnover of less than $10 million at the time the original lodgement was due.

Navigating the Changes: Your Next Steps

To avoid the pitfalls of revised, higher penalty rates, it's crucial to ensure you provide us with all necessary information well before the lodgement due date. This will ensure your lodgements are completed on time, safeguarding you from unnecessary penalties.

Should you anticipate any delays, we recommend engaging with the ATO and communicating your situation. We're here to assist you in requesting lodgement due date extensions, applying for remissions, or even establishing payment plans to manage your tax debts effectively.

Small businesses have the opportunity to benefit from the lodgement penalty amnesty, allowing you to submit eligible overdue forms before 31 December 2023. The ATO will automatically remit any associated failure-to-lodge penalties.

At First Class Accounts Ovens and Murray, we're here to guide you through these changes.  Should you have any questions please contact us.

The cost of a new employee

When you’re calculating pay rises, it’s important to think about more than just how much you can afford. You also need to consider the true cost of replacing that employee.

Low pay rises can be unexpectedly expensive

It’s surprisingly common for businesses to offer low pay rises, only for workers to feel undervalued and resign. The employer is left with all the upfront costs of replacing them, plus paying the salary, plus training the new employee and lost productivity as they learn the ropes.

Some estimates put the cost of a new employee at around 40% of their salary and a 2021 Australasian survey put the price at an average of $23,860 per worker.

Overall, that low pay rise could cost your business a lot more than you bargained for.

Not paying enough might just cost you an employee

If you run the numbers you’ll see the impact that an insufficient pay rise can have.

Let’s say you employ Ashley, an office manager who is paid $60,000. You offer Ashley a 4% pay rise, which will cost you around $2,400 more each year. With inflation running at over 7%, Ashley feels this isn’t enough and finds a job paying $68,000 almost immediately.

If you had provided Ashley with a 10% pay rise, it would have cost you around $6,000 more each year and you would still have your employee. Finding a new employee could cost you $20,000 or more.

Running the numbers

Make sure you understand salaries in your industry, and think about inflation, when you calculate pay rises.

Also consider how easy it would be to replace the person and how much value they bring to your business.

And think about extra benefits you could offer a valuable team member: do they want more flexibility or a four-day week?

We can run the numbers for you before your remuneration reviews or if you are looking to hire. 

If you have any questions about pay rises or hiring this year, get in touch – we’d love to hear from you.

Take care of yourself, not just your business

Ways to nurture your wellbeing as an entrepreneur

Don't overwork yourself

Schedule time for non-work-related activities

Take up an activity that promotes wellbeing

Talk about your worries, concerns and anxiety

Get Your Business Records Ready for Your Tax Return 2023

Organising your documents now will mean you can work with your Tax Agent to get your tax return completed earlier and access any refunds due or start planning for tax payments.

Getting your business records up to date and accurate will allow us to work with you and your Tax Agent proactively to plan for the coming year.

What Records do you Need to Have Ready for the Tax Agent?

• Have you bought or sold assets? If so, you need full details of acquisitions and disposals.
• Have you taken out a new loan or other finance? You must have details of the finance arrangements and statements of monies owing at 30 June.
• Check that any bonds or deposits paid or received have been allocated correctly.
• Have you prepaid for insurance or other large business expenses that need to be apportioned to the following financial year? Make note of the portion applicable to the current financial year.
• Do you carry stock? If so, you need to perform a full stocktake at 30 June (unless you qualify for the simplified trading stock rules).
  List any doubtful or bad debts to be written off.
• Review your debtors and creditors (accounts payable and receivable). Is the list current and correct?
• Do you have loans with related entities? Reconcile the loans to and from each entity to ensure the same value is reported in the accounts of both entities.
• Ensure that all payments to company directors have been correctly captured.
• Provide records of any government grants received during the year.
• Contact details of business owners and key personnel if any have changed.

We will let you know if there are other matters to discuss with your Tax Agent before completing your tax return, such as cryptocurrency transactions, capital gains, vehicle usage, private usage apportionment or superannuation. There may also be new elements to discuss if you have received grants, refunds, credits or deferrals of business expenses and liabilities.

Remember you need to keep all your business records for seven years, so store everything securely and where possible electronically for safety and ease. We recommend integrating Apps, such as Dext, into your cloud accounting. Talk to us about integrating Dext into your business.

Once you have all your records for the 2023 financial year, make an appointment with your Tax Agent to schedule in your tax return for prompt lodgement.

Which business expenses can you claim against tax?

Incurring expenses is an unavoidable fact of running a business. But which expenses can you claim tax deductions against and which don’t meet the tax-free criteria?

Here’s our lowdown on which expenses you can claim against tax.

Which business expenses can you claim deductions against?

If your business expense is directly related to earning your assessable income then you should be able to claim a tax deduction against this particular cost.

For example, everyday business expenses that you may be eligible include:

• Your day-to-day operating expenses
• The purchases of products or services you’ve made for your business
• Certain capital expenses, such as the cost of depreciating assets like machinery and equipment used in your business.

The amount of a deduction (and when you can claim it) will vary, based on the type of expenses you’re claiming. You can find out more on the Australian Tax Office (ATO) website here.

There are three basic rules for checking the your expense claim is a valid business deduction – and that it won’t be challenged by the ATO.

1. The expense must have been for your business, available as an allowable deduction and not for private use.
2. If the expense is for a mix of business and private use, you can only claim the portion that is used for your business.
   You must have records to prove that the expense was incurred.

Which business expenses can you NOT claim?

As we’ve explained, you can claim a deduction against most business expenses that are incurred as part of your day-to-day revenue-generation activities. But there are some business expenses you cannot claim against tax.

These non-tax-deductible expenses include:

• traffic fines you receive
• private or domestic expenses, such as childcare fees or clothes for your family
• expenses relating to earning income that is not assessable
• Non-compliant payments – payments for which you have not met your PAYG withholding or reporting obligations -
  the GST component of a purchase if you can claim it as a GST credit on your business activity statement.
• Generally you cannot claim a deduction for the cost of capital assets that are dealt with under the capital gains tax rules, although there are some exceptions.
• Your deductions may be limited for expenses incurred in relation to personal services income (PSI) if the PSI rules apply to that income.

This isn’t an exhaustive list of tax-deductible expenses. There will be various ways to claim your operational expenses against the relevant reliefs and incentives offered by the ATO. It's best to seek professional advice from your accountant to understand your options. 

If you’re looking to cut back your costs we can help. Talk to us about your regular operational expenses and we’ll work with you to find the important reliefs, incentives and allowances that can be claimed.

Get in touch to start reducing your expenses.

5 Business Challenges and How to Beat Them

Founding, building and growing your own small business is a hugely rewarding experience for many people. But the road ahead isn't always smooth.

There are common challenges that crop up and ongoing issues that need to be factored into your business plan, your strategy and your own personal thinking.

So, what can you do to beat these challenges and make the journey as frictionless as possible?

5 proactive ways to overcome your business challenges

We’d all love to know what lies around the corner when it comes to the future path of your business. The truth is that every business journey is unique. But there are common challenges that every owner-manager or CEO will be faced with – and being prepared for these hurdles is the best way to leap over them and take each challenge in your stride.

We’ve highlighted five common challenges and the simple ways to overcome them:

Uncertainty 

No-one has a crystal ball to know exactly what's coming around the corner. But there are ways to be prepared for some unknown circumstances. You can't fully predict the main external threats like government policy, economic conditions or freak weather conditions. But you CAN use forecasting and scenario-planning tools to build up contingency plans so you have a Plan A, Plan B and even a Plan C. With forecasts of your business data, finances and industry trends, you can be ready to react, pivot and take positive action.

Competition

Small businesses often face stiff competition from larger, more established companies. To stay ahead of the curve, it's important to be nimble and agile. It's also vital to find your niche and to know precisely why your customers value your offering. By ploughing a unique furrow and keeping your customers happy, you can give yourself an edge over larger, slower-moving corporate-size competitors.

Access to capital

It can be a struggle to secure funding as a startup, particularly if you have limited financial resources or a poor credit history. Having a detailed funding strategy is a crucial way to overcome this problem. Keep your finances in order and make sure you have in-depth financial reports to show banks, lenders and investors. It's also helpful to focus on paying suppliers on time, keeping debt levels under control and ensuring your cashflow is in a positive position. These are all excellent ways to improve your business credit rating and show you're a stable, risk-free prospect for lenders.

Hiring and retaining employees

Attracting and retaining talented employees is difficult, especially during the ongoing talent shortage. Offering competitive salaries or benefits packages can be one way to attract people. But it's also important to think about your brand reputation, your sustainability credentials and your CSR policy – all things that Millenial and Gen Z workers value alongside decent pay and benefits packages. Employees want to be proud of where they work, so make your company a progressive, satisfying and rewarding place to work.

Keeping up with technology

Business technology is evolving at a rapid pace. It can be daunting keeping up with all the available apps, tools and software solutions that are aimed at your business. The trick is to be informed but selective about the apps you use.

Start with the operational and financial needs of the business and look for apps that can automate, improve efficiency or provide improved data and management information. Talk to us about implementing the essential apps are in your industry. And do your research and homework before you choose any software solution to add to your app stack.

Talk to us about being an agile small business

Looking to the horizon for the upcoming pitfalls is essential as an ambitious and informed business owner. We can help you generate the most informative management information, to keep you agile and ready for what lies around the corner.

We’re also on hand to discuss your ongoing strategy, how to react to upcoming risks and the best ways to access capital and manage your company’s finances.

Arrange a meeting and let’s see what the future may bring for your business.

Preparing for finalising Single Touch Payroll

It’s nearly time to make a finalisation declaration for Single Touch Payroll. There is no need to issue payment summaries to employees you have reported through STP.

Employers must complete the finalisation declaration by 14 July for employees. Employers with a mixture of employees and closely held payees have until 30 September to make the declaration.

Small employers (fewer than 19 employees) that only pay closely held payees have until the payee’s income tax return due date. Employers will need to liaise with the individual payee about the exact tax return due date.

You may have some payees who have not been reported through STP, so you still need to issue a payment summary for anyone not reported through STP. You will also need to submit a payment summary annual report (PSAR) for any payments outside the STP system.

Once the STP finalisation has been sent to the ATO, the employee’s information will be released in their myGov account and listed as ‘tax ready’.

STP Payroll Checklist

Be efficient and prepare as much as you can now so that you are able to finalise your data by 14 July.

• Check that your business details, including ABN, registered name and address and authorised contact person are correct in your software.
• You should already have necessary details for all employees, both current and any who have terminated throughout the year if you are using STP. The essential information is full name, date of birth, address and tax file number.
• Review any terminated employees. Is the correct termination date recorded in your software? Are Employment Termination Payments (ETPs) coded correctly?
• Review salary sacrifice payments to superannuation for Reportable Employer Superannuation Contributions (RESC) amounts.
• Check with us for any Reportable Fringe Benefit Tax (RFBT) amounts that should be included.
• Check that all payroll categories are assigned to the correct ATO reporting category. This includes all ordinary earnings, loadings and penalties, allowances, commissions, bonuses, leave payments and termination payments.
• You may have other unusual payments such as those made under a voluntary agreement for contractors or labour-hire arrangements—check that you have reported them correctly.

Finalising Single Touch Payroll

It’s important to verify payroll figures before finalising, in order to minimise the chance of errors and having to re-issue at a later date.The finalisation process is the same whether you are using STP Phase 1 reporting or Phase 2.

Once the payroll year is completed at 30 June, you can then analyse the payroll amounts for each employee and cross-check against the numbers in your profit and loss accounts.

Talk to us today if you would like us to make the STP end of year process easier by reviewing and validating your payroll figures prior to finalising the data and lodging with the ATO. The end of the payroll year will be here sooner than you think.

Keeping your cashflow strong in tough times

Small businesses are particularly vulnerable in tough economic times.

When sales are slow, there are still overheads and salaries that need to be sorted.

At First Class Accounts Ovens and Murray, we understand that the key to staying afloat and continuing to thrive during this time is pre-planning and forward thinking.

Here are some tips to help your business thrive in these difficult times:

Get a clear picture of your payroll and planned expenses

It's important to have a detailed understanding of your business's expenses so that you can plan for any potential shortfalls.

Make sure you have a clear picture of your payroll, and any other planned expenses that will need to be accounted for. If there’s even a possibility that there could be a shortfall, it’s essential to meet this head-on.

By forecasting and budgeting meticulously, you'll be able to better understand how you're placed to weather financial strains if or when they arise.

Invoice early

Sending invoices as soon as possible and in advance can help you receive payments sooner. By proactively billing your clients or customers, you increase the chances of receiving payment promptly. Offering a retainer or similar deal to regular clients or customers can also encourage them to book services or make purchases in advance, providing you with a cash flow boost.

Chase payment 

It's essential to follow up on any outstanding payments during tough times. Maintain strong communication with your clients and proactively remind them about their unpaid invoices. By initiating conversations and expressing the importance of timely payment, you can encourage clients to settle their dues promptly. Read 6 secrets to getting prompt payment here.

Talk to suppliers

A little honesty can go a long way. Being honest with your suppliers about your financial situation can lead to more flexible arrangements. Openly communicate with them and explore the possibility of extending a line of credit or negotiating alternative payment terms. Suppliers who value an ongoing business relationship may be willing to work with you to find mutually beneficial solutions.

Review Inventory

Evaluating your inventory can help identify potential cost-saving measures. Look for local suppliers who may offer cheaper alternatives, reducing shipping costs. Additionally, consider discussing alternative products with your suppliers that could help you lower expenses without compromising the quality or value you offer to your customers.

Review your costs

It’s also a good idea to do a general review of expenses. Business costs can creep up, and it’s a great idea to make a time to check on your expenses regularly, no matter what your financial situation. Review all of your regular payments and subscriptions as well as upcoming costs. There may be travel, functions or purchases which you can decide on an alternative approach to.

Talk to the bank or tax department

If you're experiencing tight cash flow, it's important to initiate early conversations with your bank and tax department. By discussing your situation, you can explore available options for financial assistance, such as credit facilities or tax payment extensions. Proactive communication allows you to put necessary arrangements in place and ensures you have the support needed to navigate challenging times.

Need help? 

We can help you implement strategies to protect your business for the long terms and help you alleviate cashflow worries.  Get in touch.

12 Ways to Improve Your Business Performance

Are you looking to improve business performance and take your company to the next level?

We understand the challenges you face in today's business landscape. That's why we're here to help you maximise your business performance with 12 simple yet powerful strategies.

12 simple yet powerful strategies to maximise your business performance

1. Harness Technology

In today's world leveraging technology is crucial for improving business performance.

Evaluate your business processes and identify areas where technology can streamline operations, improve communication, and enhance efficiency.

 Explore the best software applications, automation tools, and digital platforms that align with your business needs. For instance, you can implement accounting software, such as Xero, to streamline financial processes, or customer relationship management (CRM) software to improve client interactions.

By embracing technology, you'll reduce manual work, increase accuracy, and free up time for more strategic initiatives.

2. Eliminate Distractions

Time is the scarcest resource for businesses, so it's crucial to identify and eliminate distractions that hinder productivity.

Start by evaluating your daily activities and pinpoint tasks or meetings that consume excessive time without yielding significant results. Consider reducing standard meeting durations, implementing efficient communication channels, delegating non-essential tasks, and eliminating any unnecessary administrative work.

By streamlining your workflow and focusing on high-value activities, you'll make better use of your time and energy.

3. Say Goodbye to Bad Customers

While it may seem counterintuitive, holding onto unprofitable or troublesome customers can drain your resources and hinder growth.

Take a close look at your customer base and identify customers who consistently delay payments, demand excessive support, or are simply not a good fit for your business. Whenever possible, transition away from these customers and redirect your efforts towards more profitable and mutually beneficial relationships.

This allows you to concentrate on clients who appreciate your services and contribute positively to your bottom line.

4. Invest More

Now that you've freed up time and resources, it's essential to reinvest them strategically.

Consider allocating the extra time towards researching and implementing new initiatives that will enhance your business performance. Whether it's investing in employee training and development, upgrading technology infrastructure, or expanding your product/service offerings, make sure to allocate dedicated time, key personnel, and funds to support these initiatives.

By investing wisely, you'll position your business for long-term growth and success.

5. Get a Plan

A clear roadmap is essential for navigating the challenges and opportunities of running a business.

Take the time to develop a comprehensive business plan that outlines your goals, strategies, and action steps. Start by defining your business's mission, vision, and values, then identify your target market, competitive advantages, and growth opportunities. Break down your goals into actionable tasks with specific timelines and milestones.

Regularly review and update your plan to adapt to market changes and ensure you're on track to achieve your objectives.

6. Reconfigure

Surrounding yourself with the right people is critical for driving business performance.

Evaluate your team and identify individuals who may not align with your vision, show resistance to change, or fail to contribute positively to the company culture. While it may be a difficult decision, consider parting ways with these individuals to create space for growth and success.

By nurturing a team of motivated, aligned, and talented individuals, you'll foster a positive work environment and maximise productivity.

7. Focus on Value-Add

Stand out from your competitors by focusing on providing exceptional value to your customers.

Take the time to understand their needs, pain points, and desires. Tailor your products or services to address those specific needs and exceed expectations. Look for ways to go above and beyond in terms of quality, customer service, or unique features.

By consistently delivering value and making a positive impact on your customers' businesses, you'll foster loyalty, drive customer satisfaction, and generate positive word-of-mouth.

8. Be Different

Differentiation is key to attracting the right clients and employees who align with your business goals.

Identify your unique selling proposition and leverage it to position your business as a desirable choice in the market. Assess your strengths, specialised expertise, or exceptional customer service that sets you apart from competitors. Showcase your unique qualities in your marketing.

By emphasising what makes you different, you'll attract ambitious, growing, and engaged clients who appreciate the value you offer.

9. Deploy Strategic Marketing

Developing a well-defined marketing plan is essential for expanding your reach and increasing market penetration.

Allocate a percentage of your budget specifically for marketing efforts. Leverage a mix of traditional and digital marketing strategies to amplify your brand presence.

By strategically deploying marketing tactics, you'll generate brand awareness, attract new leads, and ultimately drive business growth.

10. Ask for Referrals

Word-of-mouth referrals remain one of the most powerful and cost-effective ways to acquire new customers.

Actively seek out referral relationships and develop partnerships with complementary businesses or industry influencers who can recommend your products or services. Encourage your satisfied customers to refer their friends, colleagues, or business associates to your company. Implement a referral program that rewards customers for successful referrals.

By leveraging the power of referrals, you'll tap into a network of quality leads who are more likely to convert into long-term, high-value customers.

11. Keep on Top of the Numbers

Monitoring your business's financial health and performance is crucial for making informed decisions and ensuring long-term sustainability.

It's essential to have accurate and up-to-date information on your cash flow, revenue, expenses, and profitability. Regularly review financial statements, such as profit and loss statements, balance sheets, and cash flow statements, to gain insights into your business's financial position. Additionally, identify key performance indicators (KPIs) specific to your industry and business goals. These metrics may include revenue growth, gross profit margin, customer acquisition cost, or inventory turnover.

By tracking these metrics consistently, you'll have a clear understanding of your business's financial performance, identify emerging trends, and make data-driven decisions to optimise your operations.

12. Take a Break

As a business owner, it's easy to get caught up in the day-to-day demands and responsibilities. However, it's essential to recognise the value of taking breaks and having time away from your business.

Stepping away allows you to recharge, gain a fresh perspective, and come back with renewed enthusiasm and inspiration. This break can help alleviate stress, prevent burnout, and foster creativity. When you return to your business, you'll have a clearer mindset, improved decision-making abilities, and the energy to propel your business forward.

Prioritise self-care and ensure you schedule regular breaks to maintain your well-being and maximise your long-term productivity.

A holistic approach to improve business performance

Remember, running a successful business requires a holistic approach that encompasses financial management, strategic decision-making, and personal well-being.

By incorporating these 12 tips into your business practices, you'll further enhance your business performance and create a sustainable foundation for growth.

At First Class Accounts Ovens and Murray and Busy01 Consulting, we're here to help you improve business performance. Our expert services in bookkeeping, payroll, app integration, forecasting, and more can streamline your operations.

Let's maximise your success together. Contact us today.